Naspers Limited Class N · JSE:NPN
Naspers Limited Class N — H1 FY2015 Earnings Presentation
58 slides from Naspers Limited Class N's earnings presentation, December 2014
Slide 1: Financial Results Presentation
Financial Results Presentation For the six months to September 2014
Slide 2: Important information
Important information This presentation contains forward-looking statements as defined in the United States Private Securities Litigation Reform Act of 1995. Words such as “believe”, “anticipate”, “intend”, “seek”, “will”, “plan”, “could”, “may”, “endeavour” and similar expressions are intended to i
Slide 3: Overview Financials Internet Pay-TV Outlook Appendix
Overview Financials Internet Pay-TV Outlook Appendix 3
Slide 4: Pursuing simultaneous, significant growth opportunities
Pursuing simultaneous, significant growth opportunities 1 Becoming a major ecommerce player 2 Mobile becoming dominant 3 mode of internet access Focusing on growth markets 4 5 Prioritising fast-growing segments in ecommerce Optimising the structure 4
Slide 5: Becoming a major ecommerce player globally
Becoming a major ecommerce player globally Monthly average desktop visits in billions, Y/Y growth % (excl. payments-related properties) 6 5 4 3 2 1 0 Alibaba Amazon Naspers eBay Mercadolibre Rocket Internet Rakuten JD.com 3Q'13 3Q'14 Source: ComScore, Naspers 5
Slide 6: Mobile becoming dominant mode of internet access
Mobile becoming dominant mode of internet access Mobile internet users by region (m) Top Shopping Apps in the Google Play Store 2,000 Indonesia Saudi Arabia 1,500 ~2bn Poland South Africa 1,000 Brazil India 500 0 Developed markets Naspers markets 2014E vs 2018E Source: Similarweb, 5 November2014 As
Slide 7: Focusing on high growth markets
Focusing on high growth markets 1HFY15 M&A by country (ZAR3,9bn) 1H FY15 Development spend* by country (ZAR4,4bn) India (82%) Brazil (5%) India (15%) Brazil (13%) South Africa (4%) Other (3%) South Africa (14%) Nigeria (11%) Turkey (3%) Romania (3%) Indonesia (4%) Other (43%) * Based on economic int
Slide 8: Prioritising fast growing segments in ecommerce
Prioritising fast growing segments in ecommerce Emerging markets: visits per segment (% change YoY) 45% +4.1% 30% -5.0 +4.2% 15% -2.1% 0% Etail 3Q 2012 3Q 2014 Classifieds Source: IDC, Naspers 8
Slide 9: Strong asset base for growth in classifieds
Strong asset base for growth in classifieds Population size (m) Our position* Brand China 1,357 #1 58.com India 1,252 #1 OLX US 316 - - Indonesia 250 #1 OLX Brazil 200 #1 OLX Pakistan 182 #1 OLX Nigeria 174 #1 OLX Bangladesh 157 #1 OLX Russia 143 #1 Avito Japan 127 - - Mexico 122 - - Philippines 98
Slide 10: Optimising the structure: rest of ecommerce
Optimising the structure: rest of ecommerce Marketplaces Etail Other Restructured Merger Sold • Outside of focus area + • Strategic decision to focus on the • Two of SA’s leading etail businesses consumer ISP business, without • Transformation to create a more combine to create a platform of being a
Slide 11: Overview Financials Internet Pay-TV Outlook Appendix
Overview Financials Internet Pay-TV Outlook Appendix 11
Slide 12: 1H FY15: Synopsis of consolidated financials
1H FY15: Synopsis of consolidated financials Revenue (ZARbn) Development spend (ZARbn) Sep 13 Sep 14 20% 35% 4.0 34.4 28.8 2.98 Core headline earnings (ZARbn) Core HEPS (ZAR) 24% 22% 6.1 4.9 15.28 12.48 12
Slide 13: Focus areas showing strong growth in revenue
Focus areas showing strong growth in revenue Incremental revenue* by segment, YoY (ZARm) 44% 18% 6% 30% 72% of revenues earned offshore 10,930 3,109 337 Internet 61,982 Fastest growing revenue segment Constitutes 58% of group revenues 47,606 Revenue trends: - Ecommerce +43% YoY - Tencent +46% YoY Se
Slide 14: More opportunities resulting in increased spending
More opportunities resulting in increased spending Incremental development* spend by segment, YoY (ZARm) 48% 13% 87% 42% Further investment Major investments in high growth markets Focus on building leading positions 72 71 Ecommerce 1,154 Larger classifieds footprint resulted in higher spend Increas
Slide 15: Summarised consolidated income statement
Summarised consolidated income statement Sep 13 Sep 14 ZARm ZARm Revenue* 47,606 61,982 Currency impact Less: Associates and joint ventures (18,851) (27,619) Revenue* up 24% on constant currency basis Consolidated revenue 28,755 34,363 Trading margin Decline due to increase in development spend Trad
Slide 16: Core headline earnings drivers
Core headline earnings drivers Incremental core headline earnings drivers, YoY (ZARm) 588 (601) (35) 24% 6,077 1,940 (1,298) 564 4,920 Sep 13 Development Pay-TV profit* Profits from listed Ecommerce* Tax & Interest Other Sep 14 spend* assets * Based on economic interest, i.e. assuming equity account
Slide 17: Investment in growth opportunities dampens FCF
Investment in growth opportunities dampens FCF Sep 13 Sep 14 Operating cashflow ZARm ZARm Down due to higher development spend Working capital Operating cash flow 3,904 2,490 Almost all etail operations now generating negative working capital Capex (1,978) (1,435) Capex Finance leases (382) (445) Pa
Slide 18: Balance sheet solid
Balance sheet solid Sep 14 ZARm Increase US$369m of debt-funded acquisitions Debt: (offshore US$2.9bn) (33,203) Some currency impact on translation Cash: (South Africa R4.2bn) 10,755 Net debt Excludes transponder leases of ZAR7.6bn, considered to be an operating cost Closing net debt (22,448) Gearin
Slide 19: Overview Financials Internet Pay-TV Outlook Appendix
Overview Financials Internet Pay-TV Outlook Appendix 19
Slide 20: Ecommerce growing strongly: YoY performance metrics
Ecommerce growing strongly: YoY performance metrics Etail Classifieds Other Daily visitors Monthly active users Daily payment transactions +39% 226m +70% Items sold New listings Payments TPV +36% +83% +36% Average daily GMV New mobile listings Items sold on marketplaces +59% +345% 753k / day 20
Slide 21: Ecommerce: strong organic revenue growth
Ecommerce: strong organic revenue growth Ecommerce revenue and trading profit/(losses) (ZARm) Strategic Fastest growing segment 24,000 Focus on building leading positions in growth markets 20,355 18,000 Investing in etail, classifieds and payments – all gaining market share from other formats 43% 12
Slide 22: Etail: focusing on attractive markets
Etail: focusing on attractive markets 11 companies 19 markets +59% average daily GMV 22
Slide 23: Etail: revenue growth accelerating
Etail*: revenue growth accelerating Revenue (ZARm) Strategic 7,000 Scaling operations in attractive markets 65% Delivering compelling customer propositions 6,690 Expanding through M&A 3,500 4,064 Operational Substantial increase in organic traffic Major acceleration in Flipkart’s growth rates (categ
Slide 24: Payments: focus on becoming leader in new world growth markets
Payments: focus on becoming leader in new world growth markets Europe Poland, Czech Republic, Turkey, Ukraine, Hungary, Romania, Russia 1 brand Latin America* India 18 Chile, Panama, Peru, Brazil, markets Argentina, Mexico, Colombia Africa South Africa, Kenya, Nigeria Online $$$$$ $$$$$ Multiple Mer
Slide 25: Classifieds: joining forces to develop markets
Classifieds: joining forces to develop markets Strategic benefits of agreement Salient features of transaction A single large platform Combine know-how • Agreement with Schibsted (also Telenor and SPH) • JV’s in Brazil, Indonesia, Thailand and Bangladesh • Transaction based on relative metrics • A s
Slide 26: Classifieds: OLX the leader across emerging markets
Classifieds: OLX the leader across emerging markets +40 Countries +20 Offices +1,200 Employees Activity Reach +200M +35M MONTHLY MOBILE APP ACTIVE USERS DOWNLOADS 25M 8,5M 11B Monthly listing Monthly transactions Monthly page views Note: numbers include OLX brand only 26
Slide 27: Classifieds: mobile transforming our business
Classifieds: mobile transforming our business Mobile listings [indexed on Sep 2013] Country YoY growth 14 Brazil 1,241% 12 10 8 6 Nigeria 548% 4 Global 345% Poland 267% 2 India 219% 0 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 27
Slide 28: OLX India continues to strengthen its leading position
OLX India continues to strengthen its leading position Net new listings (for sale + vehicles), indexed OLX Mobile listers 6 900,000 +220% OLX 4 YoY 600,000 2 300,000 Quikr - - Apr-14 May-14 Jun-14 Jul-14 Aug-14 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Source: Website data Source: Mobile webs
Slide 29: Classifieds: rolling out aggressively, following playbook
Classifieds: rolling out aggressively, following playbook Naspers positions (number of countries) Strategic Aggressive expansion strategy Professional operations 23 Roll-out following best in class play-book Operational 16 Outgrowing competition on most important metrics (focusing on mobile) Strong
Slide 30: As a result, we have a fantastic asset base for growth
As a result, we have a fantastic asset base for growth Population size (m) Our position* Brand China 1,357 #1 58.com India 1,252 #1 OLX US 316 - - Indonesia 250 #1 OLX Brazil 200 #1 OLX Pakistan 182 #1 OLX Nigeria 174 #1 OLX Bangladesh 157 #1 OLX Russia 143 #1 Avito Japan 127 - - Mexico 122 - - Phil
Slide 31: Listed internet: Tencent
Listed internet: Tencent operating profit (RMBm) Q3 2014 statistics • 468m combined monthly active WeChat and Weixin user accounts (+39% YoY) • 542m monthly active smartphone QQ IM user accounts (+36% YoY) 19,194 CAGR Operations +25% 62% Business performing well across all segments 15,633* Establish
Slide 32: Listed internet: Mail.ru
Listed internet: Mail.ru EBITDA (RURm) Q3 2014 statistics Monthly audience of Mail.ru portal now 57.8m Operations 15,087 Results affected by geopolitical issues CAGR Advertising revenues weaker +61% MMO games and community IVAS broadly on target 11,535 Acquired remaining 48% of VK for US$1.47bn 20%
Slide 33: Overview Financials Internet Pay-TV Outlook Appendix
Overview Financials Internet Pay-TV Outlook Appendix 33
Slide 34: Pay-TV strategy: continuing to build the platform
Pay-TV strategy: continuing to build the platform 1 Scale DTT operations • HD channels opened to non-premium tiers • BoxOffice averaging 600k VOD purchases p.m. 2 Focus on better • Customer service levels improved to 95% products • Bouquets optimised More investment 3 in local content 34
Slide 35: Pay-TV: solid performance
Pay-TV: solid performance Pay-TV subscriber homes (‘000) 10,000 16% CAGR 8,000 17% 3,227 6,000 2,560 1,837 Subscribers 4,000 1,499 1.14m net additions YoY (+342k YTD) 1,234 5,174* - Non-premium accounted for 96% of growth 2,000 4,168 4,699 3,214 3,698 - Premium stable - 872,515 DTT subscribers at 30
Slide 36: Digital Terrestrial Television (DTT)
Digital Terrestrial Television (DTT) DTT Subscribers (‘000) 817 873 900 600 541 377 300 151 23 - Mar 12 Sep 12 Mar 13 Sep 13 Mar 14 Sep 14 Operations - DTT network now largely in place - Subscriber growth momentum affected by: 11 • Regulatory delays/challenges • Delayed analogue switch-off dates - F
Slide 37: Overview Financials Internet Pay-TV Outlook Appendix
Overview Financials Internet Pay-TV Outlook Appendix 37
Slide 38: Outlook: further growth and scaling of operations
Outlook: further growth and scaling of operations • Scale up in focus segments (etail, payments) in geographies with high mobile growth Ecommerce • Solidify strong classifieds position • Deliver profitability from marketplaces and OCS • Seed online services further (India and Latam) • Accelerated in
Slide 39: Overview Financials Internet Pay-TV Outlook Appendix
Overview Financials Internet Pay-TV Outlook Appendix 39
Slide 40: Consolidated income statement – US$
Consolidated income statement – US$ Sep 13 Sep 14 Sep 13 Sep 14 ZARm ZARm US$m US$m Revenue 28,755 34,363 2,917 3,201 Operating profit 1,621 2,253 164 210 Finance costs (915) (1,208) (93) (113) Share of equity accounted results 5,139 9,932 522 926 Acquisitions and disposals 614 118 62 11 Dilution pr
Slide 41: Core headline earnings
Core headline earnings Sep 13 Sep 14 ZARm ZARm Headline earnings 3,641 4,484 Equity-settled share scheme charges 429 587 Deferred tax adjustments (49) - Amortisation of intangible assets 690 741 Business combination gains/(losses) 12 21 Retention option expense 72 109 Fair value adjustments & curren
Slide 42: Impact of currency movements
Impact of currency movements ZAR weakness positively impacted translation of offshore earnings Revenue growth YoY * Trading profit growth YoY * Core earnings growth YoY 70,000 12,000 +34% +30% +27% +24% +20% +24% 6,000 11,356 10,785 61,982 8,000 6,077 58,984 5,916 35,000 3,000 4,000 - - - Reported C
Slide 43: FX exposure: hedging to manage risk
FX exposure: hedging to manage risk Annualised net foreign input costs US$ FX Cover US$m US$ rate Pay-TV: US$342m and EUR4m (programming rights and leases) Print: EUR31m and US$3m (paper and ink) FY15 212 10.99 FY16 285 11.34 Hedging strategy Pay-TV: long-term commitments, cover up to 100% of rollin
Slide 44: Components of revenue growth
Components of revenue growth Incremental revenue YoY* (ZARm) 30% 193 11,185 61,982 2,998 47,606 Sep 13 Exchange rate impact Organic growth Acquisitive growth Sep 14 * Based on economic interest, i.e. assuming equity accounted investments are proportionately consolidated Organic growth Exchange rate
Slide 45: Development spend breakdown
Development spend* breakdown Revenue* and Development spend (ZARm) 30% Sep 13 Sep 14 % Change 42% ZARm ZARm 61,982 Ecommerce 2,425 3,579 48% 47,606 Pay-TV 570 642 13% 34,172 25,802 21,425 Print 82 153 87% 1,591 3,077 4,374 631 1,126 Total 3,077 4,374 42% Sep 10 Sep 11 Sep 12 Sep 13 Sep 14 Revenue De
Slide 46: Ecommerce: development spend
Ecommerce: development spend* Revenue* and development spend (ZARm) 43% 12,141 48% 8,502 3,579 2,425 4,409 1,042 2,955 616 Sep 11 Sep 12 Sep 13 Sep 14 Revenue Development spend 1H FY15 development spend by type Incremental development spend YoY (ZARm) 150 16 334 308 Classifieds (58%) 242 655 Etail (
Slide 47: Trading profit trimmed by organic expansion
Trading profit trimmed by organic expansion Incremental trading profit by segment* (ZARm) 67% 11% -96% -53% 34% Internet 2,598 492 (206) (34) R9bn contribution by Tencent and Mail.ru Reduced by Ecommerce loss of ZAR2.4bn Increased profitability from: 11,356 - Allegro marketplace 8,506 - OCS business
Slide 48: Contribution by associates and joint ventures
Contribution by associates and joint ventures Company PPA IFRS Other Core HEPS ZARm results adjustments results adjustments* contribution Tencent 5,923 - 5,923 274 6,197 Mail.ru 4,401 (41) 4,360 (3,832) 528 Other (326) (25) (351) 63 (288) TOTAL 9,998 (66) 9,932 (3,495) 6,437 * Headline and core earn
Slide 49: Net finance costs
Net finance costs Sep 13 Sep 14 Debt ZARm ZARm US$700m 7-year bond issued July 2010: - 6.375% coupon Interest (paid) (1,055) (1,332) US$1bn 7-year bond issued July 2013: - 6% coupon Loans and overdrafts (749) (963) Transponder leases (173) (182) 5-year US$2.25bn RCF extended to Oct 2018: - US$1,142m
Slide 50: Taxation analysis
Taxation analysis Sep 13 Sep 14 ZARm ZARm Profit before tax 4,870 11,024 Add back: Development spend* 2,898 4,025 Equity results (including impairments) (4,386) (9,932) Other gains and losses 958 124 Acquisition gains 222 (47) FX gains and losses 165 111 BEE preference dividends (48) (29) Adjusted p
Slide 51: Capital expenditure
Capital expenditure Sep 13 Sep 14 1H FY15 split by business ZARm ZARm Land, buildings & plant 264 257 170 278 Transmission equipment 1,217 548 Computer, software & network equipment 429 445 Other (including vehicles, furniture) 68 206 1,008 Capital expenditure 1,978 1,456 Capex/Revenue 7% 4% Ecommer
Slide 52: Current assets and liabilities
Current assets and liabilities Sep 13 Sep 14 Sep 13 Sep 14 Current assets Current liabilities ZARm ZARm ZARm ZARm Current portion of long-term debt 2,192 2,826 Inventory 2,486 4,204 Provisions 228 283 Programme and film rights 3,147 3,955 Trade payable 5,669 6,448 Trade receivables 5,007 4,983 Accru
Slide 53: M&A activity
M&A activity Total acquisition spend (US$m) 800 600 400 369 754 Other 634 465 200 260 - Mar 11 Mar 12 Mar 13 Mar 14 Sep 14 53
Slide 54: Pay-TV operational metrics
Pay-TV operational metrics Net additions (‘000) 1H FY15 revenue split Capital expenditure (ZARm) CAGR 3,720 Subscription (81%) 800 48% 734 Advertising (7%) 40% 684 521 Hardware sales (5%) 2,030 1,687 394 Online/Broadband (4%) 342 1,187 1,159 1,008 Other (3%) Mar 12 Sep 12 Mar 13 Sep 13 Mar 14 Sep 14
Slide 55: Print media
Print media: ZARm* Sep 13 Sep 14 % Change Operations Tough trading conditions persist Revenue 3,951 3,965 - Retained market leadership in newspapers and magazines – continued focus on efficiencies Trading profit 242 92 -62% Paarl Media built out capacity and expanded into new market segments Trading
Slide 56: Organogram depicts major brands
*Organogram depicts major brands 56
Slide 57: Glossary of terms
Glossary of terms B2C: Business to Consumer IVAS: Internet Value-Added Services C2C: Consumer to Consumer JV: Joint Venture DTH: Direct-to-Home Television M&A: Mergers and Acquisitions DTT: Digital Terrestrial Television MMO: Massively Multiplayer Online EPS: Earnings per Share NNL: Net New Listings
Slide 58: Investor Relations
Investor Relations Meloy Horn Office: +27 11 289 3320 Mobile: +27 82 7727 123 E-mail: [email protected] Website: www.naspers.com 58 58